London property allure grows as yields rise and mortage costs dive

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WITH the cost of mortgage money in Britain at less than 5 per cent and estate agents promising yields of 10 per cent on rental properties, Hong Kong investors might want to consider a second-hand property in London, an investment consultant says.

Hugh Obbard, whose company Hugh Obbard and Associates purchases properties for investors in the heart of London, refurbishes them and leases them to multinational tenants - said well-located properties could provide capital appreciation and healthy yields for medium to long-term investors.

'It is as good as a pension plan,' he said.

He warned, however, that cheap money and good yields did not make second-hand properties an investment panacea. Overseas investors were not the only ones alert to the potential as Britons also were buying for investment.

As a result, competition for tenants was stiff, he said, meaning investors had to be willing to improve properties to international standards and make a capital investment every few years to keep it up to standard.

'You have to be a pro-active investor, and you have to ensure you are maintaining your investment to the level the market wants,' he said.

'You just don't buy your bricks and mortar, and say, 'I am going to get 7 or 8 per cent cent yield'.' Mr Obbard said interest rates probably would continue to fall, making property more affordable.

That improved buying sentiment might make times tougher for mass-market tenants, but international tenants could be expected to pay rents 20 per cent to 30 per cent higher than locals, he said.